Editorial rightly points out that without substantive plan to increase tax revenue, govt has set ambitious targets.
LAHORE: This is with reference to your editorial “Budgeting for fiscal 2013-14: a magic wand perhaps?”. The editorial has rightly pointed out that without a substantive plan to increase the tax revenue, the government has set ambitious targets, both in terms of revenue generation and fiscal responsibility. No government, including the incumbent one, is ready to take the bull by the horns. The problem with Pakistan’s tax structure is that it is heavily skewed in favour of the affluent and the current government has also proved this.
No effort has been made to tax the 3.1 million people, whose data is available with NADRA. No effort has been made to increase the income tax, which is a direct and progressive tax, rather regressive measures like an increase in the GST have been proposed. A study was conducted at the Georgia State University, in the US, to quantify the under-taxed sectors of Pakistan. The results are startling and provide a framework for the government to not only increase the revenue but also move towards increase in direct taxation. For example, the study revealed that sugar, telecommunications, and the finance and insurance sectors are under taxed by 91.2 per cent, 81.3 per cent and 93.3 per cent respectively. Simply by taxing these sectors, an amount of Rs1.5 trillion could be generated.
If the new government is serious about increasing the tax-to-GDP ratio, then it has to move away from traditional sources of indirect taxation, which are, of course, easy to administer and directly tax the fat milch cows.
Omer Butt
Published in The Express Tribune, June 16th, 2013.
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